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What are the Guidelines for the Promotion of Farmer Producer Organization?

Narendra Kumar

| Updated: Jan 16, 2019 | Category: Company Registration

Farmer Producer Organization

Department of Agriculture and Cooperation, Ministry of Agriculture Government of India has identified farmer producer organization registered under the special provisions of the Companies Act, 1956. This is the most appropriate institutional form that mobilizes the framers and builds their capacity to collectively leverage the production and marketing strengths. The National policy for the formation of Farmer Producer organization is meant to serve as a reference and guide to central and state government agencies that seek to promote and support Farmer Producer Organization, especially to the producer companies. The policy links them to get the benefits under various programs and schemes introduced by Central and State Government.

What is a Farmer Producer Organization?

A Framer producer organization is a legally recognized body of farmers or agriculturist that aim to improve the standard of their living and ensure a good status of their available support, income, and profitability. Hence, a Farmer Producer Company (FPC) is a hybrid arrangement between the private limited companies and cooperative societies.

Under the companies act, 1956 a Producer company can be easily formed by 10 individual or 2 Institution or more or by a combination of both 10 individual and 2 institutions who have following business objective as the primary product of the members or import of the goods or service for their own benefits-

  • Harvesting
  • Procurement
  • Production
  • Grading
  • Pooling
  • Handling
  • Marketing
  • Selling or
  • Export

Key Points of a Farmer Producer Company

Following listed are the key points annexed with the concept of a Farmer Producer Company –

  • The main objective behind the concept of a Farmer Producer Company (FPC) is to establish farmers into a collection in order to improve and better up their bargaining strength in the market
  • They are owned and administered by the shareholder farmers (or artisans) and governed by professional managers.
  • They tend to adopt all the good principles concerning cooperatives, and also the efficient business practices of the companies and moreover, seeks to address the inadequacies prevailing in the cooperative structure.
  • A Farmer Producer Company (FPC) can be incorporated by any ten or more primary producers or even by two or more producer organizations, or by an amalgamation of both. This is done because then they can easily take on the activities concerning to production, harvesting, procurement, grading, pooling, marketing, processing, etc., of the agricultural produce.
  • It is significant to note that the Non-producers who are seeking to invest in these concerned companies as shareholders are prohibited under the respective statute.
  • All the Farmer Producer companies enjoydemocratic governance. This means that each and every producer or a member of the concerned farmer producer company has equal voting rights regardless of the number of shares they are having. Further, there is also a limitation on the amount which can be distributed as a dividend. Moreover, the Profit is largely distributed based on the “patronage”, which indirectly or directly acts as a reward for all the members contributing to that concerned business. Lastly, there can be five to fifteen directors and expert directors who can be co-opted for the professional guidance.

Guidelines for the Promotion of Food Producer Organization

Department of Agriculture and Cooperation (DAC), Ministry of Agriculture, Government of India launched a pilot programme for promoting Farmer Producer Organizations (FPOs) during 2011- 12, in partnership with state government. It was implemented through the Small Farmers’ Agribusiness Consortium (SFAC). The following are the guidelines for the promotion of Farmer Producer Organization

The objectives should be clearly stated

The first guideline for promoting of FPO is the clear object of the project. The primary objective of mobilizing farmers into member-owned producer organizations, or FPOs, is to enhance the production, productivity, and profitability of agriculturists, especially small farmers in the country.

Farmers will be organized into small neighborhood informal groups which would be supported under the programme to form associations/organizations relevant to their context. The promotion includes confederating them into FPOs for improved input and output market access as well as negotiating power. The objects of the promotion of FPO are –

  • To mobilize farmers into groups of between 15-20 members at the village level
  • Strengthening farmer capacity through agricultural best practices
  • Ensure access to the usage of quality input and services for intensive agriculture production
  • Facilitating access to fair and remunerative markets that includes producer groups to marketing opportunities through market aggregators.

Principles for Sustaining Farmer Producer Organization Development

FPOs are basically based on the values of self-help, democracy, self-responsibility, equality, equity, and solidarity. An FPO member strongly believes in the ethical values of honesty, openness, social responsibility and caring for others.

  • Voluntary and Open Membership – the organization should be open for all persons who are able to use their services and willing to accept the responsibilities of membership without discrimination in gender, social, racial, political or religious.
  • Democratic Farmer Member Control – Men and women serving as elected representatives are accountable to the collective body of members. In primary FPOs, farmer-members have equal voting rights i.e. one member, one vote and on the other hand FPOs at other levels are also organized in a democratic manner.
  • Farmer Member Economic Participation – Farmer-members allocate surpluses for any or all of the following purposes:-
    • developing their FPO, for setting up reserves where part of which at least would be indivisible;
    • benefiting members in proportion to their transactions with the FPO;
    • and give support to all other activities approved by the members
  • Autonomy and Independence – these organizations are autonomous, self- help organizations that are controlled by their farmer- members. In case they enter into other agreements with other organizations including governments or raise capital from external sources, they do so terms that ensure the democratic control by their farmer- members and maintain their FPOs autonomy.
  • Education, Training, and Information – the organization provides education and training to their farmers – members and elected representatives managers with employees. This training helps them to contribute effectively to the development of their FPOs.
  • Cooperations among Food Producer Company – it serves their members in the most effective manner and also strengthens the FPO movement by working together through local, national, regional and international structures.
  • Concern for the Community – FPOs work for the sustainable development of their communities through policies approved by their members.

Proper Selection of Resource Institution

State Government can appoint SFAC (Small Farmers Agribusiness Consortium as its Nodal Agency for identification of RIs and for the promotion of Food Producer Organization. They may directly approach SFAC to submit a project proposal for the purpose of FPO promotion and make available the necessary budget after SFAC submits a proposal and the same is approved by the SLSC.

The process of Promotion of Food Producer Organization

Food Producer Organization Service Model

The FPO offers a variety of services to its members. It can be noted that it is providing almost end-to-end services to its members, covering almost all the aspects of cultivation (from inputs, technical services to processing and marketing). It also facilitates linkages between farmers, processors, traders, and retailers to coordinate supply and demand and to access key business development services likewise market information, input supplies, and transport services. Based on the emerging needs, the FPO will keep on adding new services from time to time.

Following is the indicative list of services includes:-

  • Financial Services: The Food Producer Organization provides loans for the purchase of tractors, for crops, pump sets, construction of wells and laying of pipelines.
  • Input Supply Services: it will provide low cost and quality inputs to member farmers. It will supply pesticides, fertilizers, sprayers, seeds, pump sets, accessories, and
  • Procurement and Packaging Services: it will procure agriculture produce from its member farmers and will do the storage, value addition and packaging.
  • Marketing Services: it will encourage direct marketing after procurement of agricultural produce. With that, it enables members to save in terms of time, transaction costs, weightiest losses, distress sales, price fluctuations, transportation, quality maintenance etc.
  • Insurance Services: The FPO will provide various insurance like Electric Motors Insurance, Crop Insurance, and Life Insurance.
  • Technical Services: it promotes the best practices of farming, maintaining marketing information system, diversifying and raising levels of knowledge. It also helps in improving skills in agricultural production and post-harvest processing that adds value to products.
  • Networking Services: it helps in making channels of information (e.g. about product specifications, market prices) and other business services accessible to rural producers. In addition to this, it facilitates linkages with financial institutions, building linkages of producers, processors, traders, and consumers with government programmer.

How to Register Food Producer Organization or Food Producer Company?

Enterslice has a track record of registering Food Producer organization in much less amount than other with professional backed Team.  To know more about Farmer Producer Organization Read our article https://enterslice.com/producer-company-registration.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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